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OLR Bill Analysis
sSB 1104
AN ACT CONCERNING COMMUNITY RESTORATION FUNDS.
SUMMARY
This bill imposes a 20% state sales tax and a 3% local sales tax on
cannabis and cannabis products (excluding cannabis for palliative use),
beginning on and after the date the Department of Consumer
Protection (DCP) first issues a license to a cannabis retailer.
The bill directs the (1) state sales tax revenue from cannabis sales to
a new Community Development Corporation (CDC) Trust Fund and
(2) local sales tax revenue to a new municipal cannabis revenue
account. It requires the Department of Revenue Services (DRS)
commissioner to distribute the funds in the municipal cannabis
revenue account each quarter to municipalities on a point-of-sale basis.
Any funds for which the commissioner cannot determine the point of
sale must be transferred to the CDC Trust Fund.
The bill also creates a framework for establishing nonprofit CDCs to
partner with qualifying community development credit unions
(CDCUs) in undertaking specified community restoration and
revitalization programs and activities. It establishes a seven-member
legislative council (the CDC oversight council) to designate the CDCs
and CDCUs and oversee the distribution of cannabis tax revenue in the
CDC Trust Fund for the programs and activities. It also establishes a
process by which the Office of Policy and Management (OPM)
secretary and CDC oversight council identify and designate
community impact zones in which CDCs and CDCUs focus their
programs and activities.
Lastly, the bill authorizes the state, municipalities, and nonprofit
organizations that are exempt from property tax to make deposits with
CDCUs that must in turn be invested by the CDCU to further the bill’s 2021SB-01104-R000663-BA.DOCX
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community restoration and revitalization purposes.
EFFECTIVE DATE: Upon passage
§ 1 — COMMUNITY DEVELOPMEN T CORPORATIONS
Eligible Entities
The bill establishes the criteria organizations must meet in order to
be designated as a CDC.
Under the bill, an entity may apply to the council to be designated
as a CDC if it (1) is exempt from federal tax under section 501(c) of the
federal tax code, (2) is located in a distressed municipality (see
BACKGROUND) at the time of its application, and (3) meets the
following requirements:
1. has demonstrated effectiveness in, or has been formed for the
purposes of, building, attracting, and retaining neighborhood
wealth;
2. provides financial, educational, or related services to support
initiatives that concentrate investments in human capital and
infrastructure in a specific neighborhood or neighborhoods,
with measurable community revitalization achievements;
3. agrees to focus all of its efforts in the distressed municipality in
which it is located;
4. agrees to establish or relocate its primary office in a community
impact zone (described below) within the municipality after the
zones are designated; and
5. agrees to establish or relocate any auxiliary locations to the
municipality in which it is located.
Programs, Services, and Assistance
The bill requires each CDC to provide specific programs, services,
and assistance or grants to support community reinvestment strategies
in the community impact zone in which it is located. Its initiatives
must include the programs and services described below, in the order 2021SB-01104-R000663-BA.DOCX
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of priority listed. If the CDC has insufficient funds to execute these
strategies to a high level of quality, it must pursue each strategy in the
order listed, with an emphasis on achieving high quality before
undertaking the next strategy.
Early Childhood. The CDC must encourage early childhood
initiatives by providing, directly or in collaboration with other entities,
free or low-cost early childhood education services to families living
within the community impact zone, regardless of their income. The
services must include kindergarten preparedness and readiness
assessments. The CDC may expand its services to areas within the
municipality that are outside the community impact zone that have
poverty levels exceeding the municipal average.
Educational Achievement. The CDC must increase achievement at
public elementary and middle schools in the zone. It must coordinate
with officials at these schools to submit grant applications to the CDC
oversight council to supplement per-student funding so that it matches
or approaches the highest levels of per-student funding at any
elementary or middle school in the state. Schools receiving grants must
(1) set goals to achieve statewide mastery test scores in the top
percentiles, based on specific target goals set for each school by the
council, and (2) guarantee that a student residing in the zone will be
able to attend that specific school.
Community Assets. The CDC must rebuild community assets by
constructing, renovating, or repairing neighborhood structures or
assets that are significant to the economy or community. These include
playgrounds, sidewalks, parks, community centers, senior centers,
public libraries, urban gardens, and green spaces. (Presumably, a CDC
would undertake these efforts in conjunction with the municipality or
property owner that owns or controls the asset or structure.) To be
eligible for funding, the structures or assets must be owned by (1) the
federal government, state, or municipality; (2) the CDC; (3) the
partnered CDCU; or (4) a resident of the municipality in which it is
located. The CDC must seek to train zone residents to do some of the
work the projects require, either directly or indirectly with other 2021SB-01104-R000663-BA.DOCX
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entities or through partnerships with existing technical education and
apprenticeship programs.
The CDC must also retain, sell, or rent these structures or assets
after their completion, but it may sell them only to zone residents. The
partnered CDCU may develop a cooperative model for owning and
renting the structures and assets.
Homeownership. The CDC must increase homeownership rates by
doing the following:
1. It must track and make efforts to increase the percentage of
owner-occupied residential buildings in the zone. It must set
five-year target percentages and periodically evaluate and
revise its target amounts.
2. It must restore and repair multifamily rental buildings located
in the zone to convert them into owner-occupied residential
buildings or multifamily cooperative buildings with at least one
rental unit. To be eligible for funding, the property must
generally be owned by the CDC, the partnered CDCU, or a
resident of the municipality. However, properties that are not
owned by such entities or individuals may still be considered
for funding if the building’s owner agrees, in writing, to the
corporation’s terms furthering the bill’s homeownership
purposes. The CDC may also promote participation in existing
state and housing programs to encourage owner occupancy.
3. As with the community structures and assets described above,
the CDC must retain, sell, or rent the buildings after their
completion, but it may sell them only to zone residents. The
CDC or partnered CDCU may develop a cooperative ownership
or rental model for the buildings.
Homebuyer Education and Financial Literacy. The CDC must
support pathways to homeownership by partnering with existing
programs to offer education and financial literacy programs. The
partnerships must be joint efforts between the CDC and its partnered 2021SB-01104-R000663-BA.DOCX
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CDCU and each CDCU may develop and offer subsidized or
incentivized financial products for individuals who participate in the
programs.
Job Pipelines for Zone Residents. The CDC must consult or
coordinate with other organizations, including the Workforce
Investment Boards, to implement or participate in community work-
based training programs. The programs must provide pre -
apprenticeship or apprenticeship opportunities through instruction or
training to (1) increase literacy, math, and other technical,
prevocational, or vocational skills and (2) connect workforce, economic
development, and education systems with businesses and other zone
stakeholders. The CDC’s efforts must focus on (1) zone residents and
(2) businesses offering or carrying out training programs in the
following order of priority: in the zone, in the municipality, and
outside the municipality.
The CDC must also place zone residents with businesses that offer
employment or on-the-job training. It must select businesses in the
following order of priority: within the zone, within the municipality,
and outside the municipality if the opportunities in the zone and
municipality have been exhausted.
Community and Senior Centers. The CDC must (1) expand access
to programs at existing community or senior centers that serve zone
residents, regardless of age, or (2) convert the centers to ones to serve
all zone residents, regardless of age. (Presumably, a CDC would
undertake these efforts in conjunction with the municipality or
organization that runs the existing community or senior center.)
Transportation. The CDC must provide municipal residents with
low-cost transportation options by developing or supporting
transportation alternatives within and between municipalities for
travel to and from work, home, school, retail stores, and entertainment
venues.
Powers 2021SB-01104-R000663-BA.DOCX
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Under the bill, a CDC may:
1. acquire the real property described above (e.g., community
assets and structures and multifamily residential buildings) in
coordination with its partnered CDCU;
2. operate as a contractor or subcontractor, or establish a
subsidiary to do so, as long as the CDC or subsidiary complies
with all applicable state licensing and registration requirements;
and
3. partner or contract with contractors or subcontractors to carry
out projects and related work for the purposes described above,
provided the CDC gives first priority to a contractor or
subcontractor located in the zone and second priority to one
located in the municipality.
Partnerships with CDCUs
No later than six months after being designated a CDC, the
corporation must (1) identify a Connecticut credit union located within
the municipality in which the CDC is located that will apply to the
CDC oversight council to be designated as a CDCU or (2) issue a
request for proposal for the organization of a new Connecticut credit
union, or an existing Connecticut credit union, to partner with the
CDC.
Foreclosed or Auctioned Property
A CDC must be offered the right of first refusal in the sale of any
real property in the zone that has been foreclosed or is being sold at
public auction, provided it has notified the mortgagee or municipal tax
collector, as applicable, of its interest in acquiring the property. Under
the bill, this provision applies regardless of the state laws on mortgage
foreclosures and tax sales.
Financial Report
The bill requires each CDC to submit a financial report to the CDC
oversight council, including any information the council requires. It
must submit the report as often as the council requires, but at least 2021SB-01104-R000663-BA.DOCX
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annually.
Removing a CDC Designation
The bill allows a CDC to request that its designation be removed.
The CDC oversight council may grant the request as long as it
designates another entity to replace the CDC, based on prior
applications or through a new request for applications.
The bill also authorizes the council to remove a CDC’s designation if
(1) it determines that the CDC is unable to carry out or deficient in
carrying out the purposes described above and (2) the corporation was
given the opportunity to address and improve the deficiencies noted
by the council.
§§ 2 & 9 — COMMUNITY DEVELOPMEN T CREDIT UNIONS
Authorization
The bill authorizes Connecticut credit unions to (1) partner with
CDCs; (2) be designated as CDCUs, and if designated, engage in the
activities authorized under the bill; and (3) issue social impact bonds,
as described below.
Under the bill, Connecticut credit union service organizations may
also be designated as CDCUs. By law, a Connecticut credit union
service organization is an organization that is incorporated under the
state’s laws and established by at least one Connecticut credit union or
wholly owned by a federal or out-of-state credit union that converted
to a Connecticut credit union.
Eligible Credit Unions
The bill authorizes Connecticut credit unions and credit union
service organizations to apply to the CDC oversight council to be
designated as a CDCU. To be designated, the credit union or credit
union service organization must:
1. serve low- and moderate-income people and communities with
limited access to affordable financial services and products,
with priority, and 2021SB-01104-R000663-BA.DOCX
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2. agree to partner with at least one CDC and focus its activities
and efforts to support the corporation’s purposes.
The CDC oversight council must give priority to credit unions and
credit union service organizations that specialize in:
1. providing home mortgages or small business loans to members
with imperfect, limited, or no credit history;
2. providing financial education and counseling to members; and
3. offering products, services, and support at a low or reasonable
cost to members.
Duties and Powers
Under the bill, each CDCU must do the following:
1. submit its governance structure to the CDC oversight council
for review;
2. approve the addition of the CDC’s representatives to its
governing board, executive committee, supervisory committee,
or similar entity, in such numbers and as the credit union and
CDC agree;
3. if applicable and necessary, expand its field of membership to
allow residents of all community impact zones within the
municipality in which its partnered CDC is located to be
members of the credit union;
4. offer or agree to offer free or low-cost basic checking and
savings account services to all residents of the zone in which its
partnered CDC is located;
5. agree to establish in or move a location to the zone after it is
designated (as described below) (but the bill specifies that the
credit union is not precluded from establishing or having
locations elsewhere in the state or municipality in which the
zone is located); and 2021SB-01104-R000663-BA.DOCX
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6. develop and issue social impact bonds, in consultation with its
partnered CDC, to support or supplement the CDC’s efforts.
The bill specifies that the social impact bonds must be designed to
maximize tax benefits to investors in cases where the community
impact zone aligns with federally designated opportunity zones.
Financing CDC Activities
The bill authorizes each CDCU to develop low-cost or subsidized
financial products and services to support its CDC’s goals and apply to
the CDC oversight council for funding to do so. It also authorizes each
CDCU to collaborate with its CDC to help finance or facilitate
investments in real property or community structures and assets, as
described above.
Financial Report
Each CDCU must submit a financial report to the CDC oversight
council, including any information the council requires. It must submit
the report as often as the council requires, but at least annually.
Removing a CDCU Designation
The bill allows a CDCU to request that its designation be removed
and to cease its partnership with the CDC. The CDC oversight council
may grant the request as long as the CDC identifies another credit
union or credit union service organization to replace it or issues a
request for proposal for one.
The bill also authorizes the council to remove a CDCU’s designation
if (1) it determines that the CDCU is unable to carry out or is deficient
in carrying out the purposes described above and (2) the CDCU was
given the opportunity to address and improve the deficiencies noted
by the council.
§ 3 — CDC OVERSIGHT COUNCI L
Membership and Governance
The bill establishes a seven-member legislative council comprised of
the treasurer, Department of Economic and Community Development 2021SB-01104-R000663-BA.DOCX
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(DECD) commissioner, Commission on Women, Children, Seniors,
Equity and Opportunity executive director, and four members
appointed by the governor. The governor must seek to appoint
individuals (1) with broad community knowledge and experience with
communities within the eligible census tracts described below and (2)
who reflect the ethnic, gender, and economic diversity of these
communities. He must make his appointments between August 1, 2021
and August 31, 2021.
The treasurer and DECD commissioner must co-chair the council
and jointly schedule and hold its first meeting by September 1, 2021.
Beginning on and after January 1, 2022, the council must meet at least
six times each year. A majority of the council constitutes a quorum for
transacting business.
Vacancies must be filled for the unexpired term by the appointing
authority (i.e., governor). (However, the bill does not specify the term
length for appointees.) Council members are not paid, but must be
reimbursed for expenses within available funds. The Commerce
Committee’s administrative staff serve as the council’s staff.
Duties
The bill requires the council to perform the following duties:
1. establish eligibility criteria for designating CDCs, CDCUs, and
community impact zones and designate them in accordance
with the bill;
2. establish an annual budget as described below;
3. oversee the investments, deposits, and disbursements for the
Community Development Corporation Trust Fund;
4. approve CDC and CDCU programs, services, and activities to
further their purposes;
5. oversee, support, and coordinate these programs, services, and
activities within and across municipalities and with other 2021SB-01104-R000663-BA.DOCX
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relevant state agencies, entities, and initiatives;
6. advise CDCs, CDCUs, state agencies, and other entities on the
core purposes of CDCs and CDCUs;
7. review the disbursement of funds to CDCs and CDCUs, and
contracts entered into by these entities, to evaluate their impact
and effectiveness and ensure that decisions they make
regarding services, grants, or financial instruments are based
solely on the purposes described under the bill;
8. review the reports CDCs and CDCUs submit to it; and
9. do all things necessary to carry out its duties and
responsibilities under the bill.
Designating CDCUs
The bill requires the council to designate CDCUs from among
applicants that fulfill the bill’s requirements. It may designate only one
CDCU for each municipality (i.e., town, city, borough, consolidated
town and city, or consolidated town and borough).
Designating CDCs
Criteria. By October 1, 2021, the council must release its criteria for
prospective applicants seeking to be designated as a CDC. In addition
to the eligibility requirements for CDCs described above, the council’s
criteria must consider (1) whether the applicant’s leadership and
governance has broad community representation, with an emphasis on
ethnic and economic diversity reflective of the municipality in which it
is located, and (2) the professional competence and relevant experience
of its management and staff.
Required Submissions. Each applicant must include a letter of
support from the municipality’s chief elected official and a statement
that the applicant agrees to locate its office in a community impact
zone once these zones are designated.
Deadlines. The council must accept applications from October 1, 2021SB-01104-R000663-BA.DOCX
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2021 through January 31, 2022, and announce its selections by March 1,
2022. The council may designate only one CDC for each municipality.
Annual Budget
The council must establish an annual budget that sets forth the
amount in the CDC Trust Fund to be (1) invested; (2) disbursed for
CDC and CDCU programs, services, activities, and expenses; and (3)
set aside for the intensive reading instruction program and mental
health or substance abuse disorder treatment services described below.
Intensive Reading Instruction Program. The council’s budget
must set aside an amount equal to the amount appropriated in the
state budget act, up to $3 million, for the State Department of
Education’s (SDE) intensive reading program for grades kindergarten
through three and select low-achieving elementary schools. The
council may reduce the amount set aside for the program if there are
insufficient funds in the CDC Trust Fund to provide for the CDC and
CDCU purposes established under the bill.
The council must make the set-aside funds available to implement
or support the intensive reading instruction program or any statewide
early literacy initiative SDE develops and implements, regardless of
whether the program relates to a community impact zone or qualifies
for other CDC or CDCU programs or funding. The set-aside funds
must supplement any existing or available funding.
The council must (1) establish application forms and criteria for the
funds and (2) give first priority to applications from schools located in
a community impact zone, as long as all such schools apply. Any funds
awarded to these schools must be distributed on a zone-wide basis and
be used solely to make the program available to all students reading
below proficiency level who live, or attend a school, in the zone.
The council must give second priority to applications from schools
located in a distressed municipality on the basis of their student
reading achievement level, as determined by the SDE commissioner.
Mental Health and Substance Abuse Disorder Treatment 2021SB-01104-R000663-BA.DOCX
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Services. The council must set aside an amount in its annual budget
to provide financial assistance to health care providers and facilities
providing mental health or substance abuse disorder treatment
services in any municipality. The council must (1) determine the
amount to be set aside, (2) establish eligibility requirements for the
assistance, and (3) publicize its availability to the relevant community.
Investment Plan
The council must, in consultation with the treasurer and
Connecticut Green Bank’s chief executive officer, adopt an investment
plan with the goals of (1) yielding long-term investment returns to
support CDC and CDCU programs, services, and activities and (2)
supporting a substantial portion of the fund’s annual expenditures
from the investment returns. The initial investment plan must establish
an investment strategy for at least 20 years; the council may
periodically revise the plan by affirmative vote.
The council must annually review the plan and investment returns
generated and adjust the amounts invested and disbursed each year
accordingly.
Social Impact Bonds
The council must develop a proposal to allow social impact bonds to
be issued by the state to support public schools located in community
impact zones. By February 1, 2022, the OPM secretary must report to
the General Assembly on the proposal, including recommendations on
ways to leverage the opportunity zone program to support these
schools.
Audits
The council may require an external, independent audit of any CDC
or CDCU. It may also request the Auditors of Public Accounts to
perform audits and other related evaluations to facilitate the council’s
responsibilities under the bill. The auditors must perform any
requested audits and evaluations.
Legislative Report 2021SB-01104-R000663-BA.DOCX
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Annually, beginning by February 1, 2024, the council must report to
the governor and General Assembly and provide:
1. a list of CDCs, CDCUs, and community impact zones
designated to date and
2. a summary of CDC and CDCU programs, services, activities,
and efforts and the CDC Trust Fund disbursements to support
them.
§ 3 — COMMUNITY IMPACT ZON ES
The bill establishes a process by which the OPM secretary and CDC
oversight council identify and designate community impact zones (i.e.,
the targeted areas in which CDCs and CDCUs focus their activities).
Metrics for Selecting Census Tracts
The process begins with the OPM secretary selecting eligible census
tracts within distressed municipalities that will be eligible to have a
designated community impact zone. In selecting the tracts, the
secretary must consider the:
1. educational level attained by the tract’s population, specifically
the percentage that has attained an associate or bachelor’s
degree;
2. most recent third grade reading and math scores on the
statewide mastery test;
3. unemployment rate;
4. state of the local economy, employment availability, and job
access and diversity;
5. percentage of the population receiving public assistance;
6. percentage of the population below the federal poverty level;
7. homeownership rate;
8. percentage of vacant housing; and 2021SB-01104-R000663-BA.DOCX
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9. crime rates.
By August 1, 2021, the OPM secretary must release a list of census
tracts eligible for consideration, based on a demonstration of the
greatest socioeconomic need using the metrics listed above.
Zone Criteria
In addition to releasing a list of eligible census tracts, the secretary
must also, by August 1, 2021, release the criteria for determining areas
within the tracts to be designated as community impact zones.
The criteria must take into consideration the goals, purposes, and
requirements the bill establishes for CDCs and may give weight to one
or more of the following:
1. the existence of a public elementary school; early childhood
center; or community center serving children, seniors, or both in
the area;
2. the existence of a local community organization comprised of
residents and leaders in the area whose role complements the
goals, purposes, and requirements for CDCs;
3. the area’s proximity to existing or planned public
transportation; and
4. existing access to an asset-based housing organization focusing
on homeownership and financial literacy.
Designated Zones
By June 1, 2022, each CDC must submit a proposal to the council for
up to two geographically distinct areas within an eligible census tract
in which it is located to be designated as a community impact zone.
The council must, by August 1, 2022, announce its selections. It must
designate one zone for a municipality with a population of 100,000 or
fewer and two zones for a municipality with a population greater than
100,000.
If the council rejects a proposal or does not designate an area that a 2021SB-01104-R000663-BA.DOCX
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CDC proposed, it may allow the CDC to resubmit a proposal if a zone
has not otherwise been designated.
CDC Offices
By February 1, 2023, or as soon as practicable following the zone
designations, each CDC must establish an office or relocate its office in
the zone.
§ 4 — CDC TRUST FUND
Establishment
The bill establishes the CDC Trust Fund as a separate, nonlapsing
fund and requires it to contain any money the law requires. The fund’s
investment earnings must be credited to its assets. The CDC oversight
council must use the fund for the CDC and CDCU purposes
established under the bill. (The bill does not appear to authorize the
fund to be used for the reading instruction and mental health and
substance abuse treatment programs described above.)
Investments
The treasurer must (1) invest the fund’s deposits in a reasonable and
appropriate way to achieve the fund’s objectives; (2) exercise a prudent
person’s discretion and care; and (3) consider such things as rate of
return, risk, term or maturity, portfolio diversification, liquidity,
projected disbursements and expenditures, and expected gifts. The bill
prohibits the treasurer from requiring the trust to invest directly in (1)
obligations of the state or any of its political subdivisions or (2)
investments or other funds he administers.
The treasurer must continuously invest and reinvest the fund’s
assets, consistent with the fund’s objectives, until they are disbursed.
Report
The treasurer must report, annually by December 31, to the CDC
oversight council and Finance, Revenue and Bonding Committee on
the fund’s receipts, disbursements, assets, investments, liabilities, and
administrative costs for the prior fiscal year. 2021SB-01104-R000663-BA.DOCX
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§ 5 — STATE, MUNICIPAL, AN D NONPROFIT ORGANIZA TION
DEPOSITS IN A CDCU
The bill authorizes the state, municipalities, and federally tax-
exempt 501(c) organizations that are exempt from property tax to
make deposits with a CDCU to be invested by the CDCU to further the
bill’s community restoration and revitalization purposes. Each CDCU
receiving such a deposit must provide a rate of return that is at least
the London Interbank Offered Rate (LIBOR).
§ 6 — LOCAL SALES TAX ON C ANNABIS AND CANNABIS
PRODUCTS
Rate and Base
The bill imposes a 3% local sales tax on the sale of all cannabis and
cannabis products, beginning on and after the date DCP first issues a
cannabis retailer license. The local tax applies in addition to the 6.35%
state sales tax on these products and must be administered in the same
manner as the state tax (state sales tax on these products goes to the
CDC Trust Fund (§ 7)).
Under the bill, “cannabis” is any part of a plant or species of the
genus cannabis, whether or not it is growing, including its seeds and
resin; its compounds, manufactures, salts, derivatives, mixtures, and
preparations; and cannabinon, cannabinol, and cannabidiol. It
excludes a plant’s mature stalks; fiber made from the stalks; a
compound, manufacture, salt, derivative, mixture, or preparation
made from the stalks; fiber, oil, or cake; sterilized seeds; industrial
hemp; and marijuana authorized to be cultivated or sold for palliative
use.
A “cannabis product” is a cannabis concentrate (e.g., oils and
tinctures) or product containing cannabis, which may be combined
with other ingredients, that is intended for use or consumption. It
excludes raw cannabis plants.
Tax Remittance
Each licensed cannabis retailer making such sales to consumers (i.e.,
individuals age 21 or older) must (1) file a tax return with the DRS 2021SB-01104-R000663-BA.DOCX
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commissioner, on or before the last day of each calendar quarter, for
the immediately preceding quarter and (2) remit the tax due with the
return. The returns must (1) be in the form and contain the information
the commissioner prescribes and (2) indicate the municipality (i.e.,
town, city, borough, consolidated town and city, or consolidated town
and borough) in which the sale occurred.
The bill prohibits any tax credits from being applied against the tax.
Municipal Cannabis Revenue Account
The DRS commissioner must deposit any local sales tax collected
into a new municipal cannabis revenue account. The bill establishes
the account as a separate General Fund account and requires it to
contain any money the law requires. The DRS commissioner must use
the account’s funds to provide the disbursements described below to
each municipality in which cannabis retailers are selling cannabis and
cannabis products to consumers.
Accounting. The commissioner must maintain (1) an accounting of
all deposits into the account, aggregated by municipality; (2) a list of
amounts remitted by each cannabis retailer; and (3) any other
information he deems necessary. He must make the respective
information available to each municipality in which a cannabis retailer
is located.
Distributions. Beginning in the second calendar quarter after the
initial deposit into the account, the commissioner must distribute to
each municipality in which a cannabis retailer is located, and for which
a point-of-sale can be determined, an amount calculated on a point-of-
sale basis. Any funds remaining at the close of the fiscal year for which
the point-of-sale cannot be determined must be transferred to the CDC
Trust Fund.
Delinquent Taxes
Under the bill, delinquent taxes are subject to a penalty of 10% of
the tax due and unpaid or $50, whichever is greater, plus interest at 1%
of the unpaid principal for each month or fraction of a month from the 2021SB-01104-R000663-BA.DOCX
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due date to the payment.
Subject to the Penalty Review Committee provisions, the
commissioner may waive all or part of these penalties when it is
proven to the commissioner’s satisfaction that failing to pay the tax
within the timeframe was due to reasonable cause and was not
intentional or due to neglect.
Liability for Willful Nonpayment of Taxes Collected
The bill makes those who are responsible for collecting and paying
the tax on behalf of a cannabis cultivation facility or cannabis retailer,
respectively, personally liable if they willfully fail to collect, truthfully
account for, or pay the tax and it cannot be collected from the business.
Under the bill, an individual or officer, partner, or employee of a
business who is responsible for paying the tax on the facility’s or
retailer’s behalf is personally liable for the full unpaid tax, plus interest
and penalties, if (1) he or she willfully fails to collect, truthfully
account for, and pay it, or willfully attempts to evade or defeat the tax
and (2) the tax cannot otherwise be collected from the facility or
retailer. The dissolution of the business does not free the person from
liability. DRS must credit any amount collected from such a person
against the taxes owed by the facility or retailer.
Tax Enforcement
The bill applies the same collection, enforcement, and appeal
process requirements established in statute for the admissions and
dues taxes to the cannabis excise tax and local sales tax, unless the
provision is inconsistent with the bill. Under these provisions, the DRS
commissioner can (1) require the facilities and retailers to keep certain
records and examine all of their records and (2) administer oaths,
subpoena witnesses, and receive testimony. The facilities and retailers
can request a hearing on the amount of taxes they are required to pay,
and appeal the hearing decision if aggrieved. Lastly, an additional
penalty may be imposed on facilities and retailers for willful violations
or filing fraudulent returns. 2021SB-01104-R000663-BA.DOCX
Researcher: RP Page 20 5/11/21
Regulations
The bill authorizes the DRS commissioner to adopt implementing
regulations for the tax.
Recording Revenue
The bill authorizes the comptroller to record the revenue the taxes
generate each fiscal year no later than five business days after the end
of July following the end of the fiscal year.
§§ 7 & 8 — STATE SALES TAX ON C ANNABIS AND CANNABIS
PRODUCTS
The bill imposes a 20% state tax on sales of cannabis and cannabis
products (as described above) and requires the DRS commissioner to
deposit the revenue into the CDC Trust Fund for each calendar quarter
ending on or after the date of the initial remittance of the tax. It
prohibits any tax credits from being allowed against the tax.
BACKGROUND
Related Bills
sSB 888 (File 569), favorably reported by the Judiciary Committee,
establishes a state excise tax on cannabis and directs the revenue to the
General Fund and two new accounts for specified purposes. It also
imposes a 3% municipal sales tax on cannabis and cannabis products
that applies in addition to the state’s 6.35% sales tax and requires
municipalities to use the revenue for specified purposes.
sHB 6443, favorably reported by the Finance, Revenue and Bonding
Committee, directs any taxes collected and retained by the state on or
after July 1, 2021 on recreational cannabis and cannabis products to a
new Connecticut Equitable Investment Fund.
Distressed Municipalities
By law, the DECD commissioner must annually designate
distressed municipalities based on a combination of economic,
education, demographic, and housing criteria. In 2020, he designated
the following 25 municipalities as distressed: 2021SB-01104-R000663-BA.DOCX
Researcher: RP Page 21 5/11/21
Ansonia Bridgeport Bristol
Chaplin Derby East Hartford
East Haven Griswold Hartford
Meriden Montville New Britain
New Haven New London Norwich
Preston Putnam Sprague
Stratford Torrington Voluntown
Waterbury West Haven Winchester
Windham
COMMITTEE ACTION
Finance, Revenue and Bonding Committee
Joint Favorable
Yea 30 Nay 18 (04/22/2021)